Restaurants Unlimited Inc., owners of the Palomino chain, said it recently signed a letter of agreement with Harbor Court Developers to occupy the entire second floor of the office and condominium building at Honolulu Harbor.

Duane Kapovich, director of marketing at the Seattle-based Restaurants Unlimited, said the downtown restaurant will likely open by mid-1997 and employ about 120 workers.

Founded in 1969, Restaurants Unlimited owns 26 eateries nationwide, including five Palomino restaurants, and has annual revenues of about $100 million, Kapovich said.

The 10,000-square-foot Harbor Court eatery will require some $3.6 million worth of construction, Kapovich added.

"We're very excited to attract a leader in destination restaurants like Palomino," said Scott McCormack, vice president of McCormack Harbor Properties Ltd., which is the managing general partner in Harbor Court Developers.

Palomino specializes in Mediterranean cuisine and spit-roasted meat dishes. Parent company Restaurants Unlimited also owns Ryan's Grill at Ward Center and Kincaid's Fish, Chop & Steak House at Ward Warehouse.

According to Kapovich, Restaurants Unlimited hoped to open a Palomino restaurant at Harbor Court several years ago but litigation between builder Harbor Court Developers and lender Mitsui Trust & Banking Co. put a lid on those plans.

Mitsui recently sold its $130 million mortgage on the building to AHI Harbor Limited Partnerships, paving the way for the new restaurant, he said.

Besides Palomino, Harbor Court recently signed up Kapiolani Medical Center for six floors of office space. The building's managers also are negotiating with video-game maker Square U.S.A. Inc. to lease 20,000 square feet. About 70 percent of Harbor Court's office space is now leased, McCormack said.